RH convertibles in focus; Zynga, Vonage hold expansions; Dominion Energy improves

By Abigail W. Adams

Portland, Me., June 13 – Trading activity in the convertibles secondary space tempered on Thursday after an influx of new paper kickstarted volume in the previous session.

There was $56 million on the tape early in Thursday’s session and $300 million in reported volume by the mid-afternoon, sources said.

While Vonage Holdings Corp.’s and Zynga Inc.’s new convertible notes were among the few issues to see more than $10 million in reported volume, they were trading largely in line dollar-neutral.

Both issues maintained the expansions seen on their market debut.

Meanwhile, Dominion Energy Inc.’s newly priced equity units continued to improve on both an outright and dollar-neutral basis.

While the new paper remained active, RH, formerly Restoration Hardware Holdings, convertible notes were the focus of trading activity on Thursday with the notes making gains on both an outright and dollar-neutral basis as stock soared following an earnings beat.

Day 2

The new convertible bonds to hit the secondary space on Wednesday remained active, although trading activity paled in comparison to their market debut.

Vonage’s 1.75% convertible notes due 2024 saw slight gains on an outright basis.

The notes were seen at 100.5 bid, 101 offered in the mid-afternoon after largely hovering at par on Wednesday.

The notes were holding onto their dollar-neutral gains, a market source said. They were up about 0.5 point on a dollar-neutral basis on their secondary debut.

Vonage stock closed Thursday at $11.65, an increase of 1.39%.

Zynga’s 0.25% convertible notes due 2024 were also largely trading in line on a dollar-neutral basis during their second day in the secondary space.

The notes were seen at par 1/8 bid, par ½ offered. They also continued to hold onto their dollar-neutral expansion of about 0.5 point.

Zynga stock closed Thursday at $6.23, an increase of 0.65%.

Dominion improves

While the new convertible notes in the space were largely trading sideways, Dominion’s equity units improved on both an outright and dollar-neutral basis.

The units traded as high as 103 before closing the day at 102.25.

They were improved about 0.25 point dollar-neutral, a market source said.

The units remained active with more than 2.3 million changing hands.

However, activity paled in comparison to Wednesday when nearly the entire 14 million unit deal size was in play.

Dominion common stock continued its upward momentum on Thursday, closing the day at $76.07, an increase of 1.32%.

While the units traded up to 101 on their secondary market debut on Wednesday, they were largely flat dollar-neutral.

RH in focus

RH’s convertible notes were in focus on Thursday as stock soared following a large earnings beat.

The luxury furniture retailer’s 0% convertible notes due 2020 and 0% convertible notes due 2023 were among the most actively traded issues of the day.

The 0% notes due 2020 jumped almost 7 points outright to close Thursday at 113.625, according to a market source.

The bonds saw more than $10 million in reported volume. While active early in the session, trading tempered with stock coming in as the session progressed.

RH’s 0% convertible notes due 2023 gained about 7 points to close the day at 90.5, a market source said.

The bonds also saw more than $10 million in reported volume.

Both issues expanded dollar-neutral on the move up, a market source said.

RH also has a 0% convertible bond that matures on June 15, 2019.

However, the bond has already completed the averaging period prior to it being taken out, a source said.

RH stock traded as high as $121.75 shortly after the opening bell but came in as the session progressed to close the day at $109.91, an increase of 15.83%.

Stock soared after an earnings beat and an upbeat forecast.

RH reported first-quarter earnings of $1.85 per share versus analyst expectations for earnings of $1.55 per share.

The company reported revenue of $598 million versus analyst expectations for revenue of $584 million.

Guidance for 2019 was raised to earnings per share of $8.76 to $9.27 versus the previous range of $8.05 to $8.69.

The earnings report was in stark contrast to RH’s fourth-quarter earnings report in March, which sent the company’s stock and its convertible notes on a downward spiral.

The sell-off in late March was sparked by RH’s previous reduction of its forward guidance.

Mentioned in this article:

Dominion Energy Inc. NYSE: D

RH NYSE: RH

Vonage Holdings Corp. NYSE: VG

Zynga Inc. Nasdaq: ZNGA

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